Those looking for further proof that the Fed regional activity reports are totally bogus can find it in a pair of Fed economic reports today.

Let’s investigate the divergence between the Dallas Fed Manufacturing Survey and the Chicago Fed National Activity Index.

Dallas Fed Manufacturing Production

The survey states “Texas factory activity continued to increase in September. The production index, a key measure of state manufacturing conditions, edged down to 19.5 from 20.3 in August, indicating output grew at about the same pace as last month.”

Econoday offers this blurb:

Hurricane Harvey didn’t slow down Texas manufacturing at all based on the Dallas Fed’s September report which is led by a strong 4.3 point gain in the general activity index to 21.3 for the best result in 7 months. Readings throughout the report are far above zero to indicate robust month-to-month growth: production 19.5 in September vs 20.3 in August, new orders 18.6 vs 14.3, hours worked 18.4 vs 14.4.

Employment is a special highlight, at 16.3 vs 9.9 to indicate the sharpest rate of hiring in nearly 3-1/2 years. There is an indication of price pressures likely tied to Harvey and its effect on petroleum costs as prices paid rose to 34.9 vs 26.9 for the highest reading since July 2011.

Chicago Fed National Activity Index

Chicago Fed National Activity Index 3-Month Moving Average

Econoday Comments:

Hurricane Harvey made its effects felt in the national activity index which fell to minus 0.31 in August for the weakest showing since August last year. The 3-month average fell to minus 0.04 for only the second negative score this year. Negative readings in this broad composite are consistent with subpar economic growth.

Negative pull came especially from the production component as industrial production, hit by Harvey dislocations, showed declines for all 3 components — manufacturing, mining and utilities. Also weak was personal consumption & housing with retail sales pulled down by weak auto sales, another likely Harvey effect centered in Houston, and also housing starts where the South showed sharp Harvey-related effects.

Texas Refineries Shut

Did! Did Not!

There you have it, folks. Hurricane Harvey was very disruptive nationally, just not in the Dallas Fed region.

This curious statistic is despite the fact that Dallas Fed region refineries and chemical production plants were shut down for lengthy periods.

Mike “Mish” Shedlock